Special Feature: MC’s EX and DX Strategy
EX Strategy Promotion
MC is promoting our EX Strategy with the goal of both balancing a stable supply of energy and resources with decarbonization of social and economic activities to realize a carbon-neutral society. In implementing our EX Strategy, during the term of our Midterm Corporate Strategy 2024, we are investing around 1.2 trillion yen into EX-related fields, aiming for a total investment of around 2 trillion yen by 2030. Through close coordination among each Business Group and the newly established Next-Generation Energy Business Group, we are envisioning and implementing a wide range of initiatives starting with building an EX-related supply chain.
Message from the Senior Vice President
Norikazu Tanaka
Representative Director
Senior Executive Vice President
Energy Transformation
Progress in EX
The relevant Business Groups, who have got together and launched the EX Task Force in October 2021, have since held discussions around a wide range of perspectives on the policies that MC should adopt to realize a decarbonized society. At the time of my appointment as the EX Task Force Leader in April 2022, there were already more than 200 potential projects being discussed by our Business Groups. I could truly feel that each Business Group had made EX their own issue. The mission of MC’s EX is to balance reliable energy supply with the realization of a carbon-neutral society. The prioritization of fields and projects that we will pursue in the three years of the Midterm Corporate Strategy 2024 have been already selected, and our short listing is mostly complete.
EX includes not only renewable energy and next-generation energy such as hydrogen, ammonia, and sustainable aviation fuel (SAF), but also transition fuels such as natural gas and mineral resource products such as copper, nickel, and lithium that support electrification. It is essential to take on the challenge in a wide range of fields, instead of focusing on a specific area, in order to achieve reliable supply of energy with the transition to a decarbonized society. To make tangible progress in creating new businesses during the Midterm Corporate Strategy 2024 period, in April 2023 we evolved the EX Task Force into the Next-Generation Energy Business Group, forming a strong foundation to promote EX initiatives. These efforts demonstrate the Company’s level of commitment to EX.
The Roles of the Senior Executive Vice President in Charge of EX
The CEO of each Business Group and the Head of the Next-Generation Energy Business Group oversee the promotion and management of individual EX-related projects. My role is to lead our companywide EX Strategy, including investment efficiency, by checking whether the creation of MC’s desired EX portfolio is progressing according to plans from a companywide management perspective and by working with the CEO of each Business Group.
Passing on a Series of “Small Successes” to the Next Generation
Although some say that we are close to the arrival of a decarbonized society, the reality is that much remains unsure and no definite scenario has been envisioned for 2050. At the same time, technological innovation is progressing very rapidly. Given this type of environment, it is important that we prepare rigorously for a wide range of possibilities so that we can build a business that will be a growth driver for EX no matter the scenario. Moreover, to achieve ambitious targets, it is important that we first accumulate “small successes.” As discussions with our partners progress and development decisions approach for certain projects, we can feel we are surely marching toward tangible outcomes. However, during this process, it is important that we set targets in each field, and by achieving those targets, that we continuously produce clear success cases. This is a process that is not limited to EX and one that we have implemented over the course of our corporate history.
1.Building an EX Supply Chain
In our EX Strategy, we aim to connect MC’s mainstay businesses and coordinate with our partners to create new value by building an EX-related supply chain starting with a next-generation energy supply chain and a battery solutions supply chain.
❶Building a Next-Generation Energy Supply Chain
To build a next-generation energy supply chain centered on hydrogen and ammonia, we are working to connect our mainstay renewable energy business and natural gas business and to pursue business development from multiple angles in the areas of production, transportation (carriers), and usage.
As one example, on June 6, 2023, MC and our subsidiary, the Dutch integrated energy company Eneco, established the joint venture Eneco Diamond Hydrogen to develop associated renewable energy in Europe and to produce and sell green hydrogen. Using the knowledge and experience in renewable energy development that Eneco has developed over many years and MC’s vast network that spans a wealth of industries including oil refining, chemicals, steel, marine transport, and other industries, Eneco Diamond Hydrogen will pursue renewable energy development and the production and sales of green hydrogen in the European region based in the Netherlands.
❷Building a Battery Solutions Supply Chain
The move toward electrification and decarbonization in the mobility sector to realize a carbon-neutral society is an irreversible trend. In an environment that is experiencing the discontinuous integration of energy, mobility, resources, and services across industries, we are pursuing business development with EV batteries, the central node that connects these industries. MC is working to build a cross-industry business model that accumulates our knowledge and connects these diverse industries. These efforts include securing copper and scarce resources such as lithium and nickel, building mechanisms to recycle resources, maximizing battery value through sophisticated battery management, and coordinating with power networks.
2.Latest Initiatives
Awarded Hollandse Kust West Site
VI Offshore Wind in the Netherlands
In MC’s power business, we select and make investment decisions on projects based on the rich experience and network that we have accumulated over the course of many years in the industry. We have also cultivated our project development capabilities while appropriately controlling business risk from the initial development stages. As an example, MC was a forerunner in the offshore wind power generation business and undersea power transmission business in the early 2010s during the early days of the two markets. We dispatched MC employees to the project companies to assist in development, construction, and operational risk management in the everyday on-site operations, boosting the stability and profitability of the projects. In addition to the long-term ownership of these excellent projects, at the stage in which the business risk diminishes, we will work to recover our capital flexibly by transferring partial investment stakes to third-party partners. We will then invest this capital along with the human resources who have acquired on-site experience in the next prime projects. By combining multiple options in this way, we hope to expand our renewable energy business portfolio through the creation of a positive development cycle.
Against this backdrop, in December 2022, through MC’s subsidiary Eneco, MC and Shell have been successful in the tender for the Hollandse Kust West Site VI offshore wind farm (HKW, 760MW capacity) located approximately 50km off the northwest coast of the Netherlands. This will be Eneco’s fifth offshore wind project in the country, bringing its total offshore wide power generation capacity in the Netherlands to 2,500MW. This also increases MC’s renewable energy power generation capacity from 3,430MW to 3,670MW (as of the end of December 2022). HKW is scheduled to begin commercial operations in 2026 and will supply approximately 3% of Dutch electricity demand, making a large contribution to the decarbonization policies being promoted by the Dutch government. While offshore wind power generation will play a central role in the future expansion of renewable energy, it must be promoted in harmony with the environment, including marine ecosystems. In the course of this project, we have evaluated both the dependence and impact on the natural environment and coordinated with diverse stakeholders. We plan to minimize our environmental impact and manage the project in a way that contributes to our materiality of “conserving and effectively utilizing natural capital.” As such, we believe that this project will contribute to the continued expansion of offshore wind power generation.
Launch of the Marunouchi Climate Tech Growth Fund L.P.
In April 2023, through Marunouchi Innovation Partners Co., Ltd. (MIP), MC launched the Marunouchi Climate Tech Growth Fund L.P. (the Fund) to invest primarily in companies dedicated to decarbonization through the development of climate tech. As of its initial closing, the Fund, including the related investment vehicles for overseas investors, has raised 400 million US dollars of capital commitments from investors. MIP plans to raise new investment through additional rounds of funding and to increase the size of the Fund to 800 million to one billion US dollars by its final closing.
The field of climate tech has raised expectations with respect to accelerated development and application of a wide range of cutting-edge, net-zero technologies and solutions. With more funding crucial to meeting those expectations, the demand for climate tech investments is likely to grow over the medium to long term. With the Fund prioritizing investments aimed at spurring growth in companies dedicated to climate tech solutions, MC and MIP plan to leverage this opportunity to help commercialize, scale up, and rollout those entities’ cutting-edge technologies. As a result, the Fund should not only help to boost those entities’ corporate value, but also support decarbonization and the realization of a carbon-neutral society.
3.Establishment of the Next-Generation Energy Business Group
The Next-Generation Energy Business Group was established in April 2023 to advance EX initiatives, which is one of the main pillars of MC’s growth strategy in Midterm Corporate Strategy 2024. The Group is responsible for discovering low-carbon/carbon-free technologies and implementing them in society, as well as building supply chains for next-generation energy that has low environmental impact. In order to provide stable supplies of energy and resources while simultaneously supporting the decarbonization of social and economic activities, we will help realize a carbon-neutral society by promoting a broad range of initiatives in EX-related value chains, from upstream to downstream, while leveraging MC’s broad industrial network as a sogo shosha.
Masaru Saito
Executive Vice President
Next-Generation Energy Business
(Concurrently) Head of Next-Generation Energy Business Group
Bringing Together MC’s Knowledge to Shift to EX Implementation Stage
I would like to continue the stable supply of existing energy while implementing the transition to next-generation energy in stages. Thus far, we have devised our EX strategy through our EX Task Force. However, to shift to implementing our strategy, we brought together the knowledge of the people spread throughout our Business Groups to form the Next-Generation Energy Business Group. Because the contact points of the next-generation energy sector are extremely broad, we need specialists with diverse experience to connect organically to pursue project development. In addition to aiming to establish a next-generation energy business quickly, while coordinating with each Business Group, we will contribute to addressing societal and industrial challenges, starting with the creation of new carbon-neutral industries. While there are issues that we must overcome, all the members of the relevant departments will come together and move forward toward the realization of a carbon-neutral society.
LPG & Petroleum Feedstock Business Department
LPG, crude oil, petroleum feedstock
Provides stable supplies of energy and petrochemical feedstock while simultaneously supporting decarbonization efforts through our businesses and transactions related to LPG, naphtha, and crude oil.
New Power Generation Fuels Business Department
Fuel ammonia, wood pellets
To promote the use of fuel ammonia, develops projects around the world with the aim of constructing large-scale and stable supply chains.
Biofuel & E-fuel Business Department
Sustainable aviation fuel (SAF),
low-carbon methanol, low-carbon ethanol
Develops businesses related to the entire supply chain of biofuels and synthetic fuels derived from clean hydrogen, with a focus on SAF.
Refinery Business Department
Petroleum products
Promotes petroleum products business in Japan, Asia, and the US. While continuing to fulfill our responsibility to provide a stable supply of liquid fuels, we work to solve industrial issues during the transition to a carbon-neutral society.
Hydrogen Infrastructure Development Department
Hydrogen-related infrastructure
Contributes to the realization of a carbon-neutral society by utilizing various hydrogen carriers to build an international hydrogen supply chain business, which is essential for a hydrogen society.
Hydrogen Business Development Office,
Carbon Management Office,
New Technologies Office
Next-generation energy
(hydrogen, etc.), carbon credits,
CCUS
Contributes to realizing a carbon-neutral society by adopting a multifaceted approach to initiatives related to hydrogen, e-methane, carbon credits, etc.
Implementation of DX Strategy
MC is engaged in a wide range of businesses, therefore we have numerous contact points at the frontlines of businesses with challenges in need for DX solution. Through close coordination with Groups, the Industry Digital Transformation Group aims to integrate MC’s existing business with digital technology to enhance our business value. Furthermore, DX plays an important role not only in our existing businesses, but also in promoting EX. MC is committed to creating a new future, by promoting DX and EX in parallel.
1.Latest Initiatives
Launch of Food Distribution DX at Mitsubishi Shokuhin
Distribution Centers
Together with Industry One, Inc., MC is working to reduce inventory at our distribution centers by linking retail and wholesale data. More specifically, by collecting data including retail and intermediary distribution data and analyzing it with AI developed by MC Digital, Inc., we are working to reduce both inventory and food loss and to streamline ordering and warehouse operations.
In our verification testing performed together with Mitsubishi Shokuhin Co., Ltd. covering around 6,000 products, in addition to reducing inventory at our distribution centers by an average of around 30%, we succeeded in lowering the overall rate of out-of-stock items. Given these results, we began installing this system at the distribution centers operated by Mitsubishi Shokuhin Co., Ltd. for Lawson, Inc. in 2022 and have been steadily rolling it out since.
Expanding the Data Center Solutions Business
MC is engaged in the data center business through its joint venture MC Digital Realty, Inc., formed with major US data center provider Digital Realty Trust, that provides digital infrastructure helping enable digital transformation strategies of enterprises and customers.
Given the explosive increase in data processing volumes in Japan with the spread of AI/IoT and cloud services, and the further expansion of video streaming and e-commerce, a continuous increase in data center demand in Japan led by major cloud service providers is highly expected.
With the completion of a new data center in Osaka in February 2023, MC reached operating assets of 200 billion yen (power capacity of 130MW). MC will continue to carry out new development based on customers’ needs, aiming to expand its business scale further.
2.Welcoming One Year Since the Establishment of the Industry Digital Transformation Group
July 2023 marked the one-year anniversary of the establishment of the Industry Digital Transformation Group. Through gaining insights on the challenges and the need for optimization tools in a wide range of industries and businesses and in all sectors including upstream, midstream, and downstream, we are continuously developing and trialing solutions based on digital technology. MC has many business frontlines in need for DX-driven solutions. By providing DX functions to these businesses, we aim to achieve optimization of logistics and productivity improvement, which we believe will increase business value, and contribute to the development of the industry as a whole and the realization of vibrant local communities.
Takuya Hirakuri
Senior Vice President
CDO, (Concurrently) Head of Industry Digital Transformation Group
Challenging Ourselves to Create New Business Models that Go Beyond Existing Industrial Boundaries
With the Group’s mission “Shaping the Future with Digital,” members from eleven Business Groups gathered and are working together to advance three initiatives: 1) an “Enabler Business” that provides capabilities to realize DX both inside and outside of the Company, 2) the creation of new businesses through industrial restructuring with the usage of DX, and 3) the revitalization of regional and local communities using digital technology. In November 2022, we established the Choshi Branch and the Akita Branch as the frontlines of our regional revitalization initiative. We are challenging ourselves not only to accelerate the creation of MC Shared Value (MCSV) using digital technology, but also to create new business models that go beyond existing industrial boundaries.
Digital Business Development Department
DX service business/DX business development
Aims to expand business as a DX enabler while helping to promote the MC Group’s DX initiatives and achieving results through the provision of DX functions. Based on these efforts, we will expand DX service businesses that lead to new business developments and investments, and enhance the value of entire industries. We will also contribute to addressing societal challenges through the commercialization of next-generation technologies and cross-industry collaboration schemes.
Power & Community DX Department
Development of B2C customer base/ Regional revitalization initiative
Develops and provides retail services to household customers by leveraging MC Group’s wide range of products and networks. We aim to add value by fusing physical and digital solutions and combining them with existing services such as provision of electric power. We also strive to create independent, decentralized communities that both address regional challenges and revitalize the local economy by providing community-based services.
Industry Value Chain DX Department
Utilizing DX to develop efficient B2B operations businesses
Aims to develop solutions and services that help to address business- and management-related challenges that industries and companies are facing, and to provide them as a platform. To achieve this, we will strive to promote collaboration with companies that have the necessary technologies through partnerships. In the meantime, we will focus on developing businesses in the fields of logistics, mobility, and data services.
Service Industry DX Department
Utilizing DX to develop B2C service businesses
Develops FinTech business and digital services in areas such as finance, healthcare and real estate, leveraging touch points with local municipalities and residents. We collaborate extensively with partners both within and outside the MC Group and aim to realize businesses that will become pillars for the future growth of the MC Group.
Creating a New Future through Integrated EX/DX Initiatives
In the Midterm Corporate Strategy 2024, under the idea of “creating a new future,” MC stated that it will work with partners and local municipalities to address societal and industrial challenges on the themes of utilizing renewable energy and other local energy resources, creating new carbon-neutral industries, and developing vibrant communities by helping address regional challenges. Under these circumstances, we visualize creating a new future as “fostering new industries x regional revitalization.” In other words, by fostering new industries as a starting point and combining them with regional revitalization, we are creating a new future. Efforts in fostering new industries and strengthening cooperation with local municipalities are currently progressing, including the following examples. We will further accelerate our efforts by accumulating successful case studies.
Latest Initiatives
Providing Next-Generation Transportation Services to
Solve Regional Transportation Issues
MC has been operating the AI-driven on-demand bus service “KnowRoute” in collaboration with Nishi-Nippon Railroad Co., Ltd., in Fukuoka Prefecture. The on-demand buses have no fixed schedule or routes. The buses operate by AI setting and updating the optimal route in real time according to the user’s current location and destination. We are currently working throughout Japan to spread the use of on-demand buses by providing consistent support and expertise, ranging from planning to system provision and improvement measures.
We conducted a trial of KnowRoute in Shiojiri City, Nagano Prefecture, in the fiscal years ended March 31, 2021 and 2022. Having looked at usage rates and listened to requests from users for a full rollout of the service, we began full-scale operation of KnowRoute as an official service. The buses have now become a fixture in the local community.
In February 2023, we established A-Drive Inc. with Aisan Technology Co., Ltd. In anticipation of the driverless vehicle era, we have begun supporting the transition to autonomous driving services in Japan.
We will utilize our wide network and customer base to provide sustainable, safe, and convenient next-generation transportation services to communities across Japan facing various transportation challenges.
Supporting the Establishment of Kyoto University-
Mitsubishi Corporation Startup Catapult
with Mr. Nagahiro Minato, President of Kyoto University (right)
MC has decided to make a donation of 600 million yen to Kyoto University in April 2023 to support the establishment of “Kyoto University-Mitsubishi Corporation Startup Catapult,” a program to support startups that implement research findings from Kyoto University. We will promote the development and commercialization of Kyoto University’s technological capabilities and research findings in a wide range of fields to address various societal and industrial challenges.
As societal challenges such as climate change and the spread of infectious diseases become more diverse and complex, there is a growing need to commercialize R&D technologies and know-how possessed by educational institutions, etc., and to steadily implement them in society. Kyoto University has been conducting highly specialized research in a wide range of fields for many years and is continuously working to expand its support for business startups. In support of our philosophy, we have decided to make a donation to the startup support program, established by Kyoto University’s Office of Society-Academia Collaboration for Innovation.
We will shortly start accepting applications for specific projects and, after they are reviewed within Kyoto University, provide support for starting businesses for the projects in question.
Concluded a Partnership Agreement with Yatsushiro City, Kyushu Electric Power Co., Inc., and NTT Anode Energy Corporation to Expedite Carbon Neutrality in Yatsushiro City
MC has concluded a partnership agreement with Yatsushiro City (Kumamoto Prefecture), Kyushu Electric Power Co., Inc., and NTT Anode Energy Corporation to strengthen mutual collaboration among the four parties and accelerate specific efforts to grow the use of renewable energy, thereby helping to expedite Yatsushiro City’s transition to carbon-neutrality. The four parties will work together to address the following.
Agreements and Areas of Collaboration
- Leveraging of private services to promote the citywide use of renewable energy.
- Encouragement of private homes, businesses, public facilities, and other properties to switch to renewable energy.
- Promotion of local-production-for-local-consumption renewable-energy model and revitalization of the local economy.
- Leveraging renewable energy to make Yatsushiro a more resilient city that is less vulnerable to natural disasters.
- Other work designed to encourage decarbonization, including energy conservation and electrification initiatives, and PR work to raise awareness.
